Health Law Rule Saves Consumers $3.9 Billion in Premiums

Consumers avoided $3.9 billion in health insurance premium increases in 2012 partly because of the U.S. Affordable Care Act’s limits on what UnitedHealth Group Inc. (UNH), Aetna Inc. (AET) and other coverage plans can charge, the government said.

About $500 million in excess premiums will be rebated to 8.5 million people this year, while the rest of money is reflected as “upfront value” in the plans, the Health and Human Services Department said today in a statement. Last year’s savings are more than triple the $1.1 billion from 2011.

The 2010 health law, an attempt by President Barack Obama to make medical coverage more widely available and affordable, forbids most insurance plans from keeping more than 20 percent of premiums charged for profit and overhead. A report earlier this week showed that other provisions in the law penalizing hospitals for excessive readmissions and encouraging employers to offer wellness programs are slowing the growth of medical costs for insurers, which may explain the latest reimbursements.

“The health-care law is providing consumers value for their premium dollars and ensuring the money they pay every month to insurance companies goes toward patient care,” the U.S. health secretary, Kathleen Sebelius, said in the statement.

Exceeding the 20 percent threshold requires companies to reimburse customers through rebates or reductions in future premiums. The insurance industry has said that the Obama administration’s focus on premiums masks the true cause of health cost inflation: prices charged by hospitals and doctors.

Intended Effect

The rule, which governs a metric known as the medical loss ratio, “does nothing to address the main drivers of health-care costs and puts an arbitrary cap on what health plans spend on a variety of programs and services that improve the quality and safety of patient care,” Clare Krusing, a spokeswoman for America’s Health Insurance Plans, the industry’s Washington-based lobbying group, said in an e-mail.

Matt Stearns, a spokesman for Minnetonka, Minnesota-based UnitedHealth, the largest publicly traded health insurer in the U.S., declined to comment in an e-mail.

The government can’t say just how much of the $3.9 billion can be attributed directly to the medical-loss requirement, said Gary Cohen, the director of the U.S. Center for Consumer Information and Insurance Oversight, which regulates health plans.

“I don’t think that we are claiming that the $3.9 billion in savings is entirely due to the 80/20 rule,” he told reporters on a conference call. “There are other aspects of the Affordable Care Act that are contributing to this, and there are other market forces that may be contributing to this.”

He cited a new review process for insurers’ premiums that discourages increases greater than 10 percent as one example.

“The law is having its intended effect of making insurers more efficient,” Cohen said.